NYCB - FDIC blames poor management for Signature Bank crash admits oversight wasn't timely

2023-04-28 14:28:32 ET

The root cause of Signature Bank's ( OTC:SBNY ) failure was poor management, the Federal Deposit Insurance Corp. said in a review of its oversight of the lender, but admitted that its supervisory efforts could've been more timely.

"[Signature's] management pursued rapid, unrestrained growth without maintaining adequate risk management practices and controls," FDIC said in the review.

It said Signature's ( OTC:SBNY ) management "did not always heed FDIC examiner concerns, and was not always responsive or timely in addressing supervisory recommendations."

The bank funded its rapid growth by over-relying on uninsured deposits. "Additionally, SBNY failed to understand the risk of its association with and reliance on crypto industry deposits or its vulnerability to contagion from crypto industry turmoil in late 2022 and into 2023," FDIC found .

The agency conducted targeted reviews and recommended ways to address its concerns, but faced resource challenges that affected the reviews' quality. "In retrospect, FDIC could've escalated supervisory actions sooner," it admitted.

The New York State Department of Financial Services echoed FDIC's findings in its own internal review . "Signature's ( OTC:SBNY ) failure to remediate outstanding liquidity management issues undoubtedly contributed to its collapse."

The NYDFS blamed Signature's ( OTC:SBNY ) reliance on uninsured deposits and the fact that its growth outpaced the development of its risk control framework.

Shares of Signature ( OTC:SBNY ) -12.2% in afternoon trade.

The bank was taken over by FDIC last month as customers raced to withdraw deposits. Days later, New York Community Bancorp ( NYCB ) agreed to buy Signature's ( OTC:SBNY ) deposits and some of its loans.

More on Signature Bank

Crypto clients not to blame for Signature collapse - NYDFS head

FDIC hires BlackRock to sell SVB, Signature securities portfolios

Signature insiders sold over $100M in shares during crypto boom

NY Community Bancorp's Big Win At The Death Of Signature Bank

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